|Lenoir City passes hotel tax increase Increased
garbage collection fees part of new budget
By HUGH G. WILLETT, email@example.com
June 26, 2007
LENOIR CITY - Lenoir City residents will not be looking at a property tax increase this year, but rapid growth is forcing the city to seek increased revenue from other sources
The Lenoir City Council on Monday night passed the 2007-2008 budget along with increases in garbage collection fees and a new tax on hotel/motel rooms that some say is one of the highest in the state.
The council voted unanimously to pass an increase in garbage collection fees of 50 cents per month each year for a total increase of $2.50 over the next five years. The new rate will increase garbage collection fees from the current $8 per month to $10.50 per month at the end of the five-year period.
Although there was no vocal opposition to the increase in garbage collection fees, about a dozen representatives from hotels and motels in the city attended the meeting and voiced their objections to a new 5 percent tax on motel and hotel rooms.
The new tax would be "the straw that broke the camel's back" said Alpesh Patel, owner of Hampton Inn in Lenoir City.
"We are already paying a 9 percent state tax and a 5 percent Loudon County tax," Patel said.
The boost in taxes to 19 percent might be a quick shot in the arm for the city, but the long-term effects could be self-defeating, Patel warned. Travelers and local businessmen do not have to stay in Lenoir City and may decide to stay elsewhere because of the increased cost.
"We are not a destination market," he added.
Tom Sharp of the Loudon County Visitors Bureau said the 19 percent hotel tax rate would put Lenoir City second in the state only to Collierville, which recently enacted an increase that brings its rate to 19.75 percent.
The increases in garbage collection fees and the new hotel tax are a result of the city trying to maintain and improve existing services in the face of rapid growth that is stretching the existing services, according to Mayor Matt Brookshire.
"The sanitation department is self-funding. It has to pay for itself," Brookshire said.
Lenoir City has not raised its rate for trash collection since 1997, while the cost for new equipment, not to mention fuel, has increased steadily, he added.
The issue of the hotel tax was a little more complicated but still necessary, Brookshire said.
"We are sensitive to the issues of local businesses and we support the hotel and motel businesses in the city," he said. "We have been considering this issue for several years."
Much of the growth the city is experiencing is on U.S. Highway 321 near Interstate 75 where the Town Creek and Creekwood developments are planned. Most of the new hotels and motels will be in this same area, he said.
"We expect growth and we're planning for growth," he said. "We're looking ahead at what our needs will be five years from now."
Nation’s highest hotel tax in LC?
At 19 percent combined sales and occupancy taxes, Lenoir City could have the highest taxes on hotel stays in the nation should a new ordinance pass at the next Lenoir City Council meeting, according to local hotel owners.
Tennessee reportedly already holds the highest occupancy taxes in the country with other cities such as Nashville and Chattanooga hovering around 15 percent. According to information provided via the Holiday Inn worldwide directory, the current national high is Knoxville with 17.25 percent.
Lenoir City Council’s first reading of a new city hotel occupancy tax caused a stir among local hotel owners and operators. With seven local hotels represented, a group of managers and operators met June 20 in the Lenoir City Visitors Bureau to discuss the issue.
Lenoir City Council is considering a five percent city tax on hotel occupancy to help increase the city’s general budget. This tax would be collected monthly from local hotel operators.
Local Holiday Inn Express Hotel and Suites Manager Casey Anthony questioned the long-term effects of the tax. “This will affect everything in Lenoir City, not just hotels,” he said. According to owners and operators present at the meeting, most of Lenoir City’s transient business is from repeat customers.
The concern is this new tax may force corporate business travelers to reconsider their decision to stay in Lenoir City. Hotel operators said they also expect a significant drop in leisure transient stays should the ordinance pass. Travelers who once stayed in Lenoir City rather than Knoxville for events such as UT home games and the Junior Olympics may also be forced to reconsider their hotel arrangements, since the same room in Knoxville that they would rent here would cost less after tax.
“[Lenoir City hotels] have to be able to compete on price,” Mary Bryant, director of the Loudon County Visitors Bureau said. With a potential drop in transient travel, other established businesses such as restaurants, gas stations and local retail establishments could also suffer. This also could effect new developments such as Town Creek, which broke ground June 19. Anthony noted that such an increase could lead to current businesses going away or at least new businesses looking elsewhere for establishment.
“In the long term, this is going to stunt the growth of business,” said Alpesh Patel of the Hampton Inn.
A first reading of the ordinance was approved on the Lenoir City Council meeting June 11. Following a 6:40 p.m. public hearing, the ordinance could be up for a final vote at the Lenoir City Council meeting set Monday night at Lenoir City Hall.